E81: Tangent Co-Founder: How to Get Rich in Crypto (without getting lucky)

31:21I don't think a lot of people in finance get to experience these type of high profile massive crisis that often. We have the Luna thing and then we have this thing back to back. So I think that wisened me up. I think I was able to learn lessons that people might only learn when they're 10-20 years into their careers and once in their lives. So the silver lining is I'm very glad that I actually got to learn that early on versus when I'm much later in life. that's so true i mean it might not feel like that at the time but it's true like you at least it makes you it keeps you humble for the future when things are going well it's one of these things that you learn in self-awareness and in meditation right if i'm having a bad day it's gonna get better if i'm having a great day it's gonna get worse so like chill bro exactly exactly there's no reason to feel like you're a god because you probably are not right and you're gonna get humble sooner or later so it keeps you i think it's arthur cheong who says that actually he was on the podcast where he was saying i'm a cynical optimist something like that because after all the shit that happened he had like really bad happening to him yeah like it's you need to stay optimistic but don't be dumbly optimistic you know huddle to the moon upon me exactly I think there's I think a lot of people in this industry come to the same realization I remember I had cynical optimist in my Twitter bio and then after a while I thought okay this is a two on the note so I took it off and then now I go on Arthur's profile it's on his as well so I think we arrived at the same conclusion kind of separately but yeah it's hard not to be cynical if you're in crypto for a while because it is true a big part of this industry are bad actors but I just try to you know make sure I focus on the good ones one of the things I talked about with Arthur actually was and it's very like it's very linked to this notion of it's very hard to not be cynical

33:26people who are really successful in crypto will not give financial advice will not I mean obviously I mean no financial advice right but like they will not even tell their friends that they should buy crypto or Bitcoin. Because they know that there is no upside to it. Because if the thing is going up, then the other person is the genius, the one who bought. And if things go down, you're the asshole. So at some point you learn and you also learn that even if you tell your friends all the best practices to not get wrecked or most of them because it's not possible to have all of them. right they will still do the wrong things because they're greedy and they're not going to listen and they're going to do shit and you're going to be the asshole right so what's the incentive for you to even tell them in the first place um that they should buy right so if you find yourself just telling your friends you should buy crypto it's the future you probably haven't been wrecked enough because otherwise you would not do it right yeah that's why i think with the podcast as well i know some of my friends listen to it uh we never talk about prices we never give any financial advice I never tell, hey, these are my top 10 altcoin picks that you should buy.

34:37It's always about what makes this project interesting, right? So it's why am I interested in this? What is its implications for society? How does it compare to previous attempts that came before? We never, ever talk about price, no price targets. I do think that financial decisions are deeply personal, right? Who am I to tell you to buy Bitcoin or not? So I try not to engage in that as well. but if you think about the online game why why are people if you think very first principle why people in crypto to make money most of them right most of them is to make money it's not like oh for the in it for the tech or whatever it's not right and what do people want to hear price prediction what do they click on right if you're building a media company you should lean into that but if you're doing that basically you're doing the completely wrong thing so which means that most of the people who are being followed for their advices online are actually the wrong people that's what that's kind of the conclusion we got with arthur it's it makes no sense because the people who should be listened to are basically not sharing anything or not much at least in terms of like what are they investing and then the people who share all that stuff are the ones who are being followed on youtube or even twitter you have all these traders or influencers kol all this crap right and then but people want that right people right so they're being fed what they want but it's ultimately it's kind of what is going to kill them yeah exactly i do think price is a trojan horse right we all came in because we thought okay there might be a financial return like we're not going to be in this if we think there's no money to be made but i do think um kind of once people are looped into the space by promises of this kind of financial return or potential promises, they start to dig into the tech and they realize, oh, this is actually much bigger than just number go up.

36:21Because that was my journey. Exactly. I came in because I thought ICOs seem interesting. Everybody's making money. And then I looked into tech and I thought this is actually really, really interesting. I haven't seen anything like this. What are your profit taking rules to avoid what happened to you with FTX in the future? I don't think it was really a profit taking rule on FTX. It's more of a custody risk rule. So we have very strict rules around how much assets we can keep on what venues. We have very kind of strict guidelines on OPSEC as well. In general, I think I've always been quite disciplined as a profit taker.

36:57I think with 2021 December, I basically just sold everything. Because I thought there are a lot of qualitative signs that the market has topped. And I know that crypto is a deeply cyclical market. So I was able to kind of just cash out everything in December 2021. and then even throughout the cycle we have rules that okay if we think a drawdown of more than x percent is coming and the hit to the portfolio could be you know y percent then we need to take z percent off so it's very kind of procedural very standardized it's not just kind of let's go all in and let's lever up kind of thing how about taking profits from crypto into cash or into real world assets right which is what ultimately you know you might have bought one of the things I was very critical of is like the guys were flexing 500 ,000 bucks richer meal right or whatever like oh I bought a car but actually it makes sense I actually bought the only thing that I really bought in my life that was expensive was a Rolex like for I think 60k or something like that but I bought it with UST which in hindsight was like and I bought it at the absolute picotop of the watch market so then it lost like 30 % or whatever but it was still amazing compared to like the UST that went to zero right do you have anything like that where you're thinking that's why I ask you know like you had your cash in FTX but like okay it's at this part of the cycle I need to have cash in the bank basically it's boring and it's not what crypto people want it's not what I want either but like it's going to protect you from a lot of shit right because even if the banks fail as you saw with the banking crisis the fed is there to i mean the central banks are there to kind of save the depositors i think for me it comes down to uh the broader question of risk appetite and kind of risk hedging across domains of life right so uh adam grant who was a professor at wharton he wrote about how the best entrepreneurs are not necessarily the people who take the most risk even though they are portrayed to be big risk takers they're actually people who are the best at managing risks so people who take massive risks in one domain of life must have stability in other aspects of life so it's kind of like i think the analogy i think of is everybody is given roughly the same amount of wood and you have to build a table that's as stable as possible so the table holds basically all of the the risk that you can you know you can you can support so obviously the bigger the table the more risks you can support but probably the more legs you have to build the more stability you need underneath to support it or you can choose to build a smaller table or take less risk and just have like one leg and you don't need that much stability maybe you just have a stable marriage and that's it everything else is crazy it's fine so for me it's always a constant balance of okay how much risk am i taking at this point in my life having a lot of my assets in a prop fund in crypto is probably pretty high risk so that might mean i need like three or four very stable legs um in other aspects of my life so i make sure that all aspects of life are taken care of so i think backwards from there okay if i want this stability how much money do i need then i take it out and basically just finance my lifestyle for like the next 10 years or so so So if you're all in crypto, which you pretty much are, you say there is three to four other legs that you focus on that should be stable.

40:28What are they? Yeah, so I'm not all in crypto. I had to take some out to make sure I kind of support the lifestyle. I think family is a big, big one for me. I think that's what I really like about Singapore as well. The family concept is very, very strong. Everybody's married by 22. Everybody has kids by like 25. And all my friends are getting married very, very young. And I actually quite enjoy the stability that that brings to some of my friends in terms of the topics they talk about, what they focus on, their life priorities versus some of my friends back in the US are quite different. So I quite enjoy having a very stable family and personal relationships.

41:01I think having some sort of pursuit that is progressive in the sense that you can progress through it makes a lot of sense. So it could be some sort of sport that you can get better and better at, some sort of musical instrument that you can master over time or learning maybe a new language over time. I think those are very, very important as well. So for me, I picked up jujitsu about a year ago, probably 10 years too late in my life because now my body's falling apart because of it. But hopefully that keeps my mind sane as well. So family, jujitsu? Yes. Anything else? That's really all that you need because family is not just your personal family.

41:40It could be like relationships with, I consider kind of friends part of the family as well. So basically your social life and some sort of personal pursuit outside of your career. I think for me, that's enough. Yeah, there's not that much time either, right? Exactly. Especially when you work 24-7. Exactly. Where do you think the big blow up this cycle will come from? Big blow up this cycle, because we talked with Daryl I was like I like him because he's very critical and he's very on earth he's also more of a trader so he's like the trader in general they're just more again cynical and like kind of on earth and maybe a bit pessimistic but so I was like do you think an FTX or whatever Luna or whatever is going to happen again he says yeah it's going to happen again there's going to be blow up but at a much larger scale where do you think it comes from right now i don't see a lot of uh areas of well taking a step back here i think usually big blow-ups happen when there's a lot of leverage especially if the leverage is hidden where people can't see it so they don't expect it to be coming so this could happen more likely in opaque venues than in defi where you can see everything on chain opaque venues as in centralized exchanges, market makers, or lending desks that are just under collateralized and over rehypothecated to very, very risky counterparties.

43:09And this happens in TreadFi. Every few years, you get a massive blow up. Archegos recently, just exactly the same situation with 3AC as well. Just like borrow too much money, too poor of a balance sheet, liquidity issues, and then just cascading risk. So I think probably similar. I think one thing that I've learned about financial history is, you know, things never repeat exactly the same, but they always rhyme. So one of the books that I'm reading right now is called Devil Takes the Hindmost. So it's about the history of financial speculation back to 1600s, all the way back to like the tulip mania.

43:42I read it. Yeah, so it talks about how every single bubble is quite similar, even though it's different, right? Sometimes it could be railroad, sometimes it could be tulips, but there's always rhymes within these bubbles and there's subsequent blow-ups. Just some examples of that book. I think it's a DJ Spartan who like talked about this book, 2021, I think something like that. He was like, if you don't want to get fucked this cycle, you should read this book. So I read the book, but I still got fucked. Different mileage.

44:16The English is a bit hard in this book. I remember I was like, because it's old kind of old English also right it's been written a long time ago maybe like 1920 or 30 yeah exactly I mean you have an example of the book you want to talk about are you far enough in the book to be able to talk about something I really enjoyed the first part of the book actually about tulips so a lot of people thought tulip mania was like this massive a massive bubble, but it actually wasn't. It was a pretty localized bubble to the Dutch market. And I remember a funny anecdote from the book is that one of the speculators that got screwed so hard by the tulip bubble, every time he sees a tulip, he would kind of hit it with his cane after the bubble popped because he was so mad at it.

45:05And that kind of reminds me of the public reaction to crypto these days. Because after FTX, after Luna, you can see the public reaction to crypto. The knee jerk reaction is just negative. Recently, there was a video of a guy giving a a philodictorian speech at a university and he mentioned Bitcoin. And the entire stadium of students was just booing him. So - Recent video. Recent video. Maybe last month. Bullish. Bullish. Bullish. Bullish. Yeah. So I think there's always these kind of, I mean, there's different reasons why cycles happen, right? So like Howard Marks would talk about credit, Ray Daly would talk about credit expansion, Howard Marks talk about kind of market psychology and then Devil Takes the Highmost talks about kind of manias.

45:50But regardless of the reason, I think the reaction on the way up and down seems to be quite similar across every single thing. So that is really fascinating to me.

46:02So we have to talk about something. Actually, I was preparing this whole thing and I already had like content for, you know, two hours. But then I had this like light bulb moment last night and I was like, fuck i remember jason wrote this thread that went viral oh what is this how to get rich in crypto without getting lucky and i was like i because for me i i listened to naval ravikant podcast how to get rich without being lucky in 2019 and i was already building businesses since years and investing but this changed everything how i run the businesses how i invest because it's such a masterpiece right and i was like i like this i mean the podcast that's based on the thread so much that now i remember jason did something similar in crypto which like went viral so we need to talk about that and i was even thinking yesterday maybe we should do another podcast where we just go just through the thread and each like he did with his three hours and a half podcast right and then you explain everything so we can talk about that later but like for the moment i just like selected a few i mean actually 11 of them because it was hard right yeah and i would like you to explain them right so just as a context you wrote a tweet thread in november 2021 actually a few days before the picotop of the new run so the thread went viral um so it started by inspired by naval's timeless thread here are some lessons from hundreds of conversations I had as an investor as an interviewer on my podcast block crunch speaking to people in crypto who made it the first one is be careful with confusing narratives with traction the faster unearned value is accrued the the faster it will disappear.

48:00Yes. So I think with crypto, especially this cycle versus last time, is the over-focus on narratives. So with last cycle, meaning 2020 to 2021, a lot of that was driven by NFTs and DeFi and games as well. And with all three of those categories, maybe with the slight exception of NFTs, there are metrics that you can look into. So DeFi people focus on, you know, kind of loan origination for lending protocols. They focus on TVL. So a lot of fundamentals you can focus on. This cycle, the most prominent asset is meme coins. And there's not much fundamentals to speak of. It's all kind of moving on narratives.

48:44So that is something that I think is especially important for this cycle, for people to really figure out, okay, if you are investing in kind of a long timeframe, if you have holding something for five years, working with the team, then you have to be careful not to fall for kind of narratives. If you're playing short-term games and trading, I don't think there's anything bad with that, but just be very honest what games you're playing. I think this is also a common mistake by a lot of VCs, even big ones, is they see metrics pile up on a protocol, maybe because users are airdrop farming and they think, hey, this is hockey stick growth, right?

49:17This is like in Web2, when you see a hockey stick, you're supposed to invest. In crypto, oftentimes you get a hockey stick that completely reverses. So being able to think from first principles about what's driving usage here. Is it just short-term speculation? Is it anticipation of an airdrop? Or has this protocol actually tapped into something that they can retain over years is probably the number one most important lesson for any investor. Do you think that, because I understand the theory, right? But in practice, it's extremely hard. You're thinking, hey, I invested in Lido, for example. amazing protocol, great revenue, but the freaking token is not performing well, right?

50:01I mean, actually, we talked about that with Alex. He came back second time on the podcast a few months ago, and we were just talking about how he was saying fundamentals almost seems bearish in crypto because they put a ceiling to what's possible. So you end up in this kind of weird world where you should be looking for fundamentals, at least if you look at the way to invest in traditional finance. But it doesn't work. And your argument is maybe in five words it's going to work, but who wants to wait fucking five years? Yeah, I think there's two. So it's very important to know that there's two parts to this.

50:40So one is identifying fundamentals and growth. But that doesn't necessarily make the asset an instant buy just because it has great growth and fundamentals. Because there is such a thing as a bad price for a good asset. I don't think there's such a thing as a good price for a bad asset. If it's a really bad team, really bad product, very cheap, I'm not going to buy it. But there are many cases where there are great protocols, you know, growing amazingly, but the market has already priced it in. So that's why alpha is so hard to find, right? It's not just about, hey, let's find a chart that goes this way and then let's just buy.

51:13Otherwise everyone would make money. It's about finding that, but also a price that has not priced that in yet. That's where the hard part comes in. did you read the cobi's article from last night so okay because he released i mean we'll talk about that later about you know current venture state investing high fdv now it's like a big thing on twitter yeah the high fdv low float but actually he wrote an entire article so i read it last time at like 1 a.m because i was like maybe you're gonna talk about it tomorrow so i was like and he actually talks about that you might have amazing the entire price discovery happens in private markets now which is a big problem he gives some examples he gives ETH, SOL optimism and the Stark the Stark token basically right and he shows I mean I think you should read it today you probably will read it today and he explains that like the concept is basically he explains a lot of things but one of them is even if you think something is really amazing you should be patient because it might not be the right price, right?

52:18Because of different factors. Exactly, exactly. I think a lot of these lessons are very, very apparent to Tradify guys, right? Like the entire concept of margin of safety that Warren Buffett's talk about all the time is exactly this. It's like how much has this premium been priced in already and how much further it can go down. I don't think crypto guys really understand that. So that's also where the alpha comes in. It's because it's such an inefficient market that these basic lessons still are being grasped by the market that guys like me barely with any tri-fi experience can come in and make a killing on the markets because we're able to see this alpha.

52:53I do think this will go away. Like every cycle, it's already getting harder. So I think this is probably going to self-correct as well. The second tweet I really liked was, if you're helpful to enough people over time, you will have access to wealth creation opportunities. You don't need to be a coder to add value. Made me feel good about it. content network, thoughtful feedback are some other ways. Yeah. So one of the most important KBIs I try to drive on the venture side for Tension is founder referrals, right? So how many introductions is this founder willing to give me? How many testimonials is this founder willing to give me?

53:32So for instance, if I want to invest in this team, because capital is so competitive, everybody knows that venture seems to be an easy game now. So everybody wants to fight for the same allocation. So in order to win out, we need to be able to show this founder that, hey, we've helped these guys before and this is what they have to say about us. So to get that, you can't just put in money, right? You need to really be in the trenches with the founders, help them navigate very sticky conversations and just be extremely helpful. And that's the entire kind of angel investing slash venture business, I think.

54:00It's really just building your reputation as someone who's helpful. So it's not just about kind of tweeting thoughtful things and building a followers. It's about kind of building those personal relationships and actually helping people, you know, onboard TVL, helping people close senior hires, helping people onboard investors, helping people navigate legal nightmares. A lot of the things that you only really know how to do if you've been in this space and seen enough disasters over the years.

54:28Don't get in the way of compounding. Hopping between projects every six months is bad and will destroy your reputation. Treat your job opportunities as investments because they are. yeah so my style investing is very much i like to buy what i have conviction in and i like to hold it and the lower it goes i want to buy more right and i think over time i've actually learned this from daryl is that there's another way of compounding which is going from the fastest horse to the next fastest horse to the next fastest horse you can compound in both ways both are very very different games it's just that the former is more of my strength than my style and i think that also applies better for uh for from a job perspective right from people who are either accruing equity in a fund or working in a project, if you change every six months, you never allow that compounding to actually happen.

55:16And it's not like a liquid market where you can just like, you know, buy a position and cash out and then flip it. Because with company equity, they need to vest over years. So if you give up your vesting within like the first year, and then you go work for the next company because you think, hey, this thing might launch a token soon, doesn't work out, you go to the next, then, you know, five, six years from now, you're going to look back and wonder, hey, everybody who's early enough and had the balls to bet on this space seem to have made it why am i still sitting here um so i think that that's a common kind of thing that i notice in younger people as well so there is your approach and then there's the real approach right the real approach probably most people can't play it it's too hard right because you're going to be too late to the narrative and you're going to get for example as a trader or as a short-term investor you're probably going to get wrecked right because people who are smarter than you are there before so i tend to be also closer to your approach the problem is when you cut the loss or when do you there is sometimes where you just need to realize everything makes sense here but it's not working yeah i think that's because of this narrative problem that is even bigger this cycle right so what's the moment you just say the job is kind of different because the job like you're involved every day and but like as an investment when do you say okay like now i need to lower my ego and just accept that i was wrong right yeah so i think with it's different for venture as well so for venture what i mean is private investments right investments where you're locked up for years so average lock up for our investments, I think it's four years.

56:58So we're forced to hold anywhere. And we don't flip staffs. I know some investors do this. They invest in a portfolio. They tell the founder, hey, we're going to give the world to you. We're going to help you build so much. And then two months later, they sell the staff to somebody. So we don't do that. So for that type of investments, it's really zero or 100x. But you really ride or die with the investor. The thesis doesn't play out. It goes to zero. You suck it up. You move on to the next. That's part and parcel of the venture business. Now on the liquid side, if you're buying a token on Binance, for every single position that we buy at Tangent, we have a very disciplined approach to invalidation.

57:29So there's two ways to invalidate. Usually one is a thesis invalidation. Either the thesis hasn't played out. Usually that's a factor of time. So let's say six months, if you look at similar companies or protocols in the past, six months is usually how long they need to really reach escape velocity or nothing at all. Then you give it six months to play out. It's not an exact science, obviously. Number two is price, which is my less favorite, less favored invalidation, which is the price has dropped down so much. This is the max pain you're willing to take on this position and you have to cut it and re-underwrite.

57:59So that's when you become a forced seller. So very unideal situation, but I think quite necessary for proper risk management.

58:10in Kobe's article yesterday there's actually an example that I think Solana the 2018 was 4 cents right private rounds 26 million something like that you could still have bought it in May 20 20 for 50 cents but he was still saying hey like the token went down 50 percent before ripping 500x right so in that case you would probably 50 is probably a big pain that you might cut and then miss out on like jag and deco side right it's very hard yeah it's very hard it is not uh it's not an exact science right um and there are many cases where people are forced to sell the lows um so that comes back to the margin of safety right also kind of your buffering like if you're already levered before the 50 drawdown then there's no kind of buffer for you to buy in more so kind of that that's where the portfolio managing part of the uh of the job comes in that i think a lot of investors especially retail investors don't understand right they kind of i think that the average retail investor at least for me when i first started i was like oh this coin is good this coin good let's put money in when i was looking at walton chain oh this thing's going to change supply chain let's put all my money in there's no concept of portfolio management of risk management of invalidation of price targets uh of re-underwriting so all of those concepts are already perfected in tradfi so i think a lot of crypto people they're they scoff at tradfi they think oh they're boomers they don't understand crypto yeah but you don't look to tradfi guys for the crypto insight but you look to them for the frameworks they've mastered over the past like 200, 300 years.

59:49So that's something that we try to borrow as well from kind of tri-fi institutions. Don't avoid volatility. Volatility is the price you pay for outsized compounded returns. Yeah, I think a lot of people in crypto, I remember there was this Twitter thread by one of the hosts of a popular crypto podcast and he's an oil trader. And then he talked about how being a crypto trader is the worst decision you can make for your career. because you will never be able to actually compound your portfolio because you always hit your risk limits. So I think he arrived at it. So this guy is not like a nobody, right?

1:00:27He's a big oil commodities trader. But I think he reached that conclusion because he's applying TradFi risk parameters to crypto. So this is one example where you actually cannot just blindly borrow TradFi frameworks. So if you assume that crypto has similar volatility as equities, you're going to be cutting everything at 30 % drawdowns. But every month we have like a 30 % drawdown in something. so you have to adjust your risk for the volatility of crypto not just from a portfolio perspective but just from a career perspective right you have to fully expect that because of how cyclical it is in the good times people take it way too far in the bad times people also take it way too far so can you withstand two years of maybe like very very low minimum pay if you're at a protocol and expectations of maybe no upside at all and the only way you can withstand this is if you have proper risk management across your life, but also if you have strong enough of a conviction.

1:01:19But if you don't even believe in this protocol, you're only in it because you think they might launch a token soon. I can make a big buck off this. You're not going to make it in the next three, four years. Absolutely. Conviction. Absolutely. Extremely important point. And then the other one is very interesting because anyone who is involved in crypto, especially I would say full-time or near full-time, whether you're building a business or you're an investor, whatever you should understand that hey the moment everything goes up is the moment you start to stack some cash for the next bear market which will inevitably happen because if you have a podcast and you have sponsors the sponsor will disappear overnight right exactly if you are a trader and you get wrecked the money will disappear overnight right if you if you have a fund no one will want to invest anymore if it's not your own money so like there is these cycles that it's really easy to forget when everything goes well right exactly exactly half of getting rich is staying rich don't upgrade your lifestyle to match your paper wealth after historic bull run this is so good this is so good you see there's a lot in crypto where uh i always find the wealth flexing thing to be incredibly um cringe right people just flexing hey i got this watch i got these cars and stuff um so i actually quite enjoy this new trend that i saw this cycle which is people flexing wealth right people just showing hey this is my resting heartbeat this is like my squat this is my max deadlift i actually quite enjoy that um but i think the bigger point is if you make let's say a million five million dollars on paper from your venture bets none of which is vested and monetized and you start spending like you have five million dollars in the bank that's how you go broke and it happens a lot not just in crypto with athletes but the reason why so many professional athletes go broke is because they spend like they actually have that in cash but after paying the managers after accounting for illiquidity they actually don't have that much cash left and i see so many of these interviews with like pro athletes talking about their financial troubles um that that i think it applies to crypto as well the flexing of the wealth i thought a lot about it because i had a lot of people i i'm not super close to but i spend a lot of time with who are like that the chain i felt like i was with a bunch of rappers right like literally i flex all the watches i flex the chain i flex all that stuff and i just for me i was just more thinking it's probably because they come from a place where they had almost no money growing up so from a place of insecurity oh now i just kind made it and to show it right obviously you go through a cycle you get wrecked and then you realize it's for nothing i'm not gonna i'm not gonna flex that much anymore because there's not much to be flexed right yeah and also you i think getting wrecked is really important because it kind of uh like it grounds you and makes you understand what's important in life right exactly and no one gives a fuck about your watch or your chains anyway so like exactly yeah so it makes sense yeah yeah exactly which is again a really cool thing in singapore like when i do these dinners and i realize i don't know in the room there is maybe probably a couple billion dollars no one has a freaking watch if they have a watch it's an apple watch like literally it's an apple watch and i'm like or garmin right and i'm like this says something right about the kind of people they just understand that this is not the thing right or they've been through the cycle of getting wrecked enough.

1:05:06This is the best one. Don't bet what you don't have to win what you don't need. Yes. That is a comment on, mostly on leverage, but also on risk management again. I think most of the tweets in this thread are about some sort of risk management, right? So with this, I think I was specifically referring to funds that were constantly levering up in order to chase that return. But if you look at the volatility of crypto, it's already one of the highest VOL asset classes in the world. You rarely have a very liquid asset that goes up 3, 4, 5x multiple years through a cycle, right? So if you already have the volatility, the worst thing you can do is blow yourself up before you get to compound and enjoy that upside.

1:05:51But I think greed gets the better of everybody. And there's so many big funds, even some of the heroes of last cycle, that the ct main characters that just blew up from leverage alone what do you mean by what you don't need nobody needs a billion dollars in cash nobody it's completely true but so where does it come from like it's just like this competition of who is the best who is the biggest insecurity i think a lot of it is i think beyond a certain point uh of money people are in it for the game or in it for the challenge, which I totally understand and respect. But there's also differentiation that comes from skill, where you are objectively a better venture investor.

1:06:36You are objectively a better trader. And differentiated comes from leverage, where you might be the same skill level, but your outcomes are magnified because of leverage. So on the way up, you look like you're doing better. On the way down, you're doing a lot worse. so people who don't have this skill might want to supplement that with leverage and then they always find out right so there's the is the is the is a meme fuck around and find out so they fucked around and they find out yeah they find out in a bear market always actually it reminds me the conversation with arthur again because he was saying man like these guys you think they're gods but then you just realize that all their fame came from a leverage and uh and doing illegal shit basically and you put that together in the right timing is like amazing and then you find out later yeah exactly exactly but it's very hard because

1:07:33you have it's very hard because you feel you i mean you for example me i was doing very well in last but i felt i was fucking poor all the time because i see these dudes i mean there's the the classic tweet like the meme tweet of suzu uh 50 million dollars not gonna buy your reasonably sized house or something like that and then you're like what the fuck like you know you start to question yourself and also you see all these traders and these people who are flexing pnls and often it's a complete lie it's a lie or you and also because of our own insecurity we always think that people make more than they actually make we do okay some people do amazingly well until they don't right or they do amazing well great but like if they do amazing well probably they got wrecked before and learned some stuff right but it's very hard because you see all these people flexing things and numbers and starting to tell you that 50 million is nothing or 10 million is nothing right it's probably gonna happen again this cycle 10 million is nothing 1 million is nothing right and then it makes you start you're doing amazing but it makes you make the wrong decisions that ends you getting wrecked when you based your kind of judgment on some lies online so nothing makes sense right yeah it's so stupid and it's it's a waste like it's just terrible like i don't know it's gonna happen again especially yeah especially for for traders and people who are participating in liquid markets, I think the best thing you can do is actually just meet more people and read more.

1:09:13If you read about the people who really succeeded in your field in TradFi, for instance, you realize actually this comparison game is useless because if you're comparing yourself to a fund or a guy who has$50 million, he's comparing himself to a guy with$100 million,$200 million. And then you zoom out and you look at the TradFi guys, the billionaires billion dollars in cash just from like running massive hedge funds and institutions like you realize that there's always there's saying in Chinese right there's always a higher mountain so no matter how big of a man you think you are you're nothing there's always a mountain that's bigger so I think this self-comparison is really terrible for performance but internally me and Daryl we still kind of playfully compare ourselves to other funds just to keep it kind of competitive but we know like we're never going to make decisions based on where we are relative to other people.

1:10:03Are you able to not compare yourself to each other? Well, I think we have struck a really good partnership where we kind of grow the pot, wolf pack type of a mentality. So we don't really care who's bringing in the food at what point in time, as long as we are both kind of doing our jobs.

1:10:22We talked about leverage, obviously. So there's one good about leverage. Do not mistake leverage for genius. You hear stories of people brag about making eight or nine figures within a year they tend to be quiet when they lose it all in one day there are so many stories like this and i wrote this when only uh when the up only was happening when people were talking about the eight nine figures wins nobody has talked about losses yet because the losses haven't happened and then 12 months after this tweet i think maybe half the people who are flexing the wealth have lost it all just like completely went back to zero right So I think that is just human nature.

1:11:03If you combine availability of leverage, how easy it is to borrow money with a highly volatile asset class, you basically just get casino on steroids. So it's my least favorite part of crypto. I understand why it happens. I respect the game, but it's not something that I participate in. And I try to encourage, if there's one financial advice I give to my friends, it's like, don't fucking lever up and trade crypto. Don't do it. Just don't do it. So you say, I understand what happens. Can you explain why? Because the basics are so simple. It's a high volatility asset class, right? You know, even BTC, 70, 80 vol, right?

1:11:46Asset, the rest is much bigger, right? Yes. So if you, I think, put it in simple terms, if you 10x leverage, if the asset goes down 10%, your entire account is wiped. so you you limit your up how much you're able to buffer risk the more you lever up so why would people if they really understand because i don't think the majority of people are dumb right why if they understand that you can make if you enter in the bear market in a top coin let's think about march crash you get eth you up 50x on the second largest coin i mean who is gonna get the bottom and tell the top fine but like you have a 50x upside on the second largest coin you don't need leverage you don't need it why do people lever you said you understand them yeah it's pure greed right they want it's kind of up one upsmanship they want to beat the other fund right if this fund is long the same asset in the same size they're going to perform the same so the only way we can win is either we find more alpha but we can't so let's lever up on the same coin and people always talk about oh this thing has gone up x percent or 50x but they never talk about what it took to get there in every single 50x there's often multiple 50 % drops and if you're anything above 2x leverage you're completely wiped out so i think leverage only makes sense in high sharp scenarios high sharp as in your strategy has been known to produce low volatility relative to the returns or high sortino scenarios where your strategy has proven to produce low kind of downside volatility relative to upside.

1:13:22But even then, right, you're using past data to justify future decisions. Nobody ever saw May 2021 coming. Nobody saw, some people saw FTX coming. So I think in an asset class with this much volatility, most directional and discretionary strategies should not be levering significantly. yeah and if you look at it there is at least once a year a mega leverage flush at least yeah if not twice right so you will if you're more if you're levered more than 2x you're gonna get wrecked yeah yeah and for example march crash i lost 80 percent of my net worth i was levered two or three x on eath but i didn't have time to do anything right they just got completely wrecked so there and it's not oh it's a black swan no it's not like yes but no in crypto every year everyone who is levered gets killed yeah like so it doesn't make sense right but yeah I think you probably have to go there and lose it all to understand and accept it beware of Dunning-Kruger effect just because someone made it by being early in crypto does not mean they're equipped to opine, opine, opine on cryptography, macroeconomics, politics, et cetera?

1:14:49Yeah, I think there's a lot of talking hunts in crypto. I think sometimes I am an offender of this as well. I talk about things I don't fully understand, so I try not to. But I think people, because money is such an objective, it's such a widely consensus metric of success that a person who has more money than the next person, they often think I'm a better person than you. I know more than you, but that's often not true. especially in crypto when the sources of wealth can be dubious sometimes. So when people start listening to someone just because they have more money or social status or more Twitter followers, I think that could often lead them to ruin.

1:15:21When I see this, I don't want to get political, but I remember during the protests in Hong Kong, there were a lot of takes from people who I don't think has even been to Hong Kong before, opining on the politics of Hong Kong and China and all that stuff. And I was just like, yeah, this is as someone who was living in Hong Kong at the time, None of the stuff that these guys were talking about were playing out. And that happens in crypto as well, where people just opine on macro economics or geopolitics. And because the curation of signals is so bad in crypto, there's no kind of macro economists or macro guys that are accomplished, that are focused only on crypto.

1:15:58So people tend to follow crypto guys who talk about macro. And I think that you could also get wrecked by listening to these guys. So curate your signals is probably a succinct way to summarize this. do you want to explain Dunning-Kruger effect Dunning-Kruger effect is when somebody thinks they have more expertise in a topic than they actually do and it happens a lot in crypto I remember in 2018-19 I went to San Francisco for a conference and this guy introduced himself as a blockchain expert he shook my hand he's like hey I'm a blockchain expert I can advise any companies that you guys have and then I thought what do you think about the Bitcoin Bitcoin cash fork and he was like the what ah okay see it's not even like he has an opinion on everything and he's certain he's right he's like plain not aware of a bunch of stuff he just doesn't know what's going on and I think that probably happens more than we think in crypto right I had the CMO of Avalanche on the podcast but like that was probably almost a year ago and you were saying the most important thing to understand crypto is nobody knows shit.

1:17:07Like nobody knows shit. Like people think they know some things and everything, but like they just like, they don't know, right? Exactly. It's probably the safest play here.

1:17:22Crypto runs on narratives. Narratives are crafted by people. People always have an agenda. If you can't find the fish at the table, you are the fish. Yes. So I think that's pretty stuff. explanatory. I think every, because of the lack of consensus around valuation models, it's happening in equities as well. But for crypto, a lot of things just run on narratives, right? Who's talking about what assets? And a lot of these people might even be living in the same place, right? So I think there are stories of there's a bunch of crypto traders living in Puerto Rico and they all just kind of organize these narratives together.

1:17:58So you never know. I'm not saying that that's actually happening, but I'm sure there's elements of crypto where a bunch of the big accounts are coordinating and pushing a narrative to seem like it's a decentralized narrative, but it's really just coordinated. So be very careful playing narrative games is probably my takeaway from this. And it ties back to the earlier tweet about unearned value, right? Just because something seems to be taking off in price, in user counts, doesn't necessarily mean that it's going to be here to stay. There's a very big difference between hockey sticks in crypto and hockey sticks in Web2.

1:18:31Usually, if you capture a hockey stick in Web2, maybe 50-50, it is something. There are some exceptions, like we were talking about this before we recorded, that application that took off in COVID. Clubhouse. Clubhouse, right. It massively took off. Everyone thought it would be the future of media, but it wasn't. So there are cases like that. But in general, I think there's a lot more duds with crypto hockey sticks where you see, oh, user count just like 20x this past year it must be something and then a year later you check back it's like how do you differentiate between a narrative and something that's going to stay if we take meme coins for example it's a big narrative this cycle but it kind of I mean Dogecoin is there for 10 years plus last cycle there was already like some a few doing really well so there is things that seem to be something that could be like a good narrative for a cycle but also are played out in the longer term and become something that's bigger right i think in general there are three things that i look for in terms of whether a hockey stick translates into retention so number one is death defying but if something is supposed to die but it doesn't die it probably is here for a reason there's probably people supporting this that I'm not aware of.

1:19:58So like examples are things like Ethereum Classic, right? It should be gone forever, but it's still a relatively valuable protocol for some reason, especially after the 51 % attack a few years ago. So there are many, many examples of this where things should have died, but they didn't. And then I think number two is actual retention numbers. This only applies to specific verticals. So for instance, for social, I think A16Z, the Web2 fund, has done a study on retention for social protocols where above a certain threshold for the percentage of users that you retain after 30 days, it probably captures lightning in a bottle.

1:20:33So for instance, by the 30th day, I think Snapchat retained like 30 % of their user cohort. That's a really good number. Facebook was like 40%, Instagram similar. So there are numbers that you can look for. And then third is just Lindy, right? How long has this thing been around. So I think meme coins as a category has a lot of Lindy already, right? Since 2017, we already have meme coins. Specific meme coins, there's actually not that many that has kind of reached escape velocity, right? If you look at meme coins that stayed around cycle after cycle, it's really Doge and Sheep right now, maybe Pepe as well.

1:21:06But most of the new ones, they have very, very kind of short half-life. So I'm pretty confident meme coin as a category has Lindy, specific names not so much so those are the three things that kind of need to check the box before i think okay this will be sticking around paid forward the space is young and you never know where favors can pay off people who refuse to hop on a call with me when i started out now want my advice yeah so there's a lot of examples of uh people who help each other i I think in crypto, like my angel career was completely started because my friend Tom Schmidt from Dragonfly referred a deal to me, was one inch.

1:21:49So my first ever angel check. And then that was, that's taught me everything about angel investing because after he introduced me, I thought, okay, that's done. Like I just write a check here, but actually I still had to fight for it. I had to like pitch to the founder. It was a whole long process. So it taught me everything that I needed to know about winning an angel deal. But I would not have seen that deal if Tom didn't introduce the founders to me in the first place. And he just did that out as a favor. So I realized actually this is a favors game, right? You just kind of try to help people without expectation of returns and you try to plant karma everywhere.

1:22:19The converse is also true, right? A lot of people are takers. So not to quote Adam Grant too many times, but he wrote a book about give and take, about two types of people, givers and takers. And I think his conclusion is that matchers, people who give and take are people who tend to progress the furthest, have the best personal relationships um but in crypto there's a lot of takers they only try to take things from you they try to kind of get deals from you they try to get alpha from you never give anything back i think those people tend to not do so well over the long term that's a good one for me i'm a pure giver and i don't know if it's because of my swiss roots like in switzerland you don't you don't want to bother so you don't ask right you say i mean adam grant says people who do the best are the givers and takers right how likely is it for you because crypto is this weird thing where in bear market you you do stuff but like no one really has you know money or like it's no not not much happens it's where there is the best deals but like you need to find them and things are slow people don't really believe in crypto and then very quickly at some point like within a month or two kind of the bull is back and then no one has bandwidth it's like a complete chaos right and you might feel like oh man now i'm giving again you don't have expectation of return so whatever but like if i don't go out there a bit and say hey i also want something nothing might happen because even the ones who are who you're giving to like they just have no bandwidth like they're just like completely underwater what's your approach or what was your approach to that saying hey like i'll just give give give or i'll be like and now i need to also show that uh i'm here guys yeah i think uh with the podcast for instance right i i really did it for two years just by myself and i didn't get much out of it but then you know it got me my first job.

1:24:24It got me noticed by Kelvin, my former boss. So I do think that as long as you're putting out enough kind of effort out there, eventually you can kind of monetize some of these things. But if you're constantly kind of evaluating, hey, can I monetize this now? How much can I get out of this relationship? Then people can sense it. I think people can sense falseness if you're trying to calculate every relationship. This is something I see as a cultural divide as well. I think in Chinese business, they always talk about guanxi. they always talk about relationships. But I think there's like people who actually treat these relationships as something to cultivate over years before they fire the clip.

1:25:01So I've seen funds that talk to people for years and years and years before they bring them on. So they literally just plant the seeds for 10 years before they've closed the hire. And then some people who just kind of, hey, can I add your WeChat? And then instantly they ask you for things, right? So I think people can sense what type of relationship you're trying to build and your mileage will vary based on what you get. last one last one I promise the wild volatility in crypto can create and destroy wealth in a very short time every cycle you hear stories of exuberant wealth but also people who ended it all always know what is important to you and what is enough yeah I think there's a lot of dark stories in crypto I mean even in TradFi as well as with any high stakes career there's people who can't remove or lose sight of what is truly important right kind of the net worth becomes their self-worth so when you lose your net worth you feel like you're not worth anything and you just kind of end it all so i've heard some people kind of in my proximity as well who kind of just like killed themselves right in bear markets so that is something that i think is not really a crypto thing as much as it is a human thing to really realize what your worth is and i mean i'm 29 years old like what the fuck do i know right but i'm still trying to figure it out as well um and it comes back to the to the topic about having stability in your life right you don't need that many anchors you really don't need that many things that make your life meaningful you just need two or three very very deep things and also i would add you don't need that much money no yeah like there is a point after which i mean yeah you need to have breakfast i mean i do intermittent fasting so i don't have breakfast but like what you need to have lunch how much is a clean lunch if you eat clean right or how much is a clean dinner or like yeah sometimes you can go a bit crazy on holiday but again singapore is an expensive place but still like you don't need that much yeah i think there's a i mean there's an element of like just rich guys talking about money is not useful but obviously uh i mean when you have it it's uh easier to say that it's not useful right yes yes but i think that the biggest thing with money is i realize it i'm not a big spender but it's the biggest anxiety alleviator i'm a very anxious person i'm always very paranoid about things or health and all that stuff and i i have many family members close to me who need to spend a lot of money on medical treatments and stuff like that so having that buffer actually takes it off your mind right you know okay if i if my body gets fucked up in some way i know i can pay for this that is actually that the biggest untalked about uh i guess benefit of money it's it's it's it's not so much oh i can buy this i can flex this it's more just like i don't have to worry right i think that that is the one thing that um i think makes it worth it but then beyond that certain point it's all optional i think you don't really need that much where do you think your anxieties are coming from you said i'm a very anxious person on different things i think well i I think my upbringing was in Hong Kong.

1:28:07So it's a deeply, deeply cutthroat and competitive local school environment. So you're kind of always looking for edge here and there, always trying to look for your deficiency. So there's an element of that. That actually lends itself very well to survival in crypto because you're always trying to figure out, okay, can this thing blow up and screw me? Can this thing screw me this way?

1:28:27So it's negative, but it's also positive. for example i will argue yeah people some people think oh do they have a million dollar or have a 10 million dollar whatever i'm free i'm chill i always say fuck no like especially when you know that it can go away so quickly right you will always be yes okay if i fall sick i can pay whatever but like you will you always need to have a healthy level of anxiety because the day you lose this you're gonna lose everything because it's gonna go away somebody's gonna take it from you right yeah so there is no such life at least i would say as a okay maybe it's a bit more traditional traditionalist but as a man who's gonna have a family you're probably gonna be stressed all your life because you don't want to fuck up and being stressed out like is positive because it's the only way for you to stay safe, right?

1:29:25Yeah, I mean, cortisol is not an inherently negative hormone, right? It's positive in that it helps you stay away from actual risks or from actual danger. So I think if your anxiety is so much that it gets in the way of risk-taking, then it's a problem. And, you know, I'll be the first to admit, I hate trading. I do not like to look at charts and look at my P &L every day. It stresses me out. It forces me to make bad decisions. So I don't do that. So for a fund to do well, you don't actually need to be good at everything. You just need to attract the people who are great at those things and maybe bad at things that you are and then build a team around, you know, just different aspects of the game.

1:30:05So for instance, for Tangent, right? So I think there was more of the kind of liquid markets trader guy. He loves it. I hate it. And then he is not as much of the kind of sit down with a founder and talk for four hours kind of thing. And I enjoy that kind of just brainstorming with founders and so on. so finding what aspects of the game gives you stress and try to kind of delegate that and then find aspects of the game that gives you fulfillment and inherently makes you better at that game i think is one of the more hidden alphas that i've discovered uh since starting tangent as well probably the hidden alpha for any type of business right crypto or non-crypto yeah basically i think so you have pretty strong views on the current problems in crypto venture investing venture investor yeah i mean now everybody's discussing on twitter right yeah so we talked actually since a couple of days it's crazy right but you've been talking about that already for a while yeah i've talked about that since last cycle right i think the it's not really vcs problem i think people vilify vcs a lot uh so let me explain what the problem is first so basically now uh there are a lot of vc funds that have overraised they're too big there's too much money chasing the amount of deals.

1:31:16So let's call it maybe there is$200 million worth of seed stage companies that need to be funded, but there's$20 billion fighting for this. So how do you deploy the$20 billion? You either jack up the valuation so high that you can throw in bigger checks so that$200 million becomes$500 million. So you bake in a bigger premium before they launch, or you just get better as a venture investor and try to dominate the whole round, in which case you concentrate cap tables. So because of this financial dynamic, a lot of protocols are listing at a very, very high price versus 2017 ICOs when everybody could participate.

1:31:52So now retails can only buy a protocol at like a billion dollars after listing. So for a protocol to go from$10 million to a billion dollars, it's much easier than$10 billion to like a trillion dollars. It's the same multiple, but it's an order of magnitude harder. So I think that has warped the perception of opportunity in crypto, which is why people are going to meme coins because every time they buy like a tier one L1 or a new app, they're constantly just buying very highs. Even if the token does well, the upside is limited versus, you know, a new coin that there's no overhang, no VCs in. So I don't think that it's like an existential problem.

1:32:29I think this thing will overcorrect because what it means is VCs returns will compress. If you're investing in more and more expensive protocols and fewer and fewer people are buying in open markets, it means your returns go down. If your returns go down, LPs don't come in, your fund size shrinks, it resets. It just takes time. So I've been talking about this reset since 2021. Still hasn't happened. I do think within the next few years, we're going to get some normalization adventure. And that's where we go aggressive again. Yes. Basically, Suzu, he tweeted two days ago. The high FDV game results from overfunding of infra relative to apps.

1:33:02the overfunding of infra result from the lower perceived regulatory risk and execution risk of infra versus apps the solution to high fdv is for people to stop buying yes this is already happening so no further action needed correct yeah exactly exactly this is what i've been talking about for past two years it will happen um and i say it's not completely the fault of the vcs it's because the broader market is also supporting the valuations of the l1s right you have l1s that have like four users come to market and it's like 20 billion dollars um so it makes no sense why is that happening so you said the border market like maybe it's important for people to understand that there is who are the key actors that are involved especially in the private markets and then at kind of like the tg moment and that are all incentivized for it to have a high fdv right yeah yeah so founders obviously or teams uh they want a more expensive protocol um especially if for employees who have vesting tokens that they want it to be a seller higher vc's the same exchanges also want higher value protocols because usually they they correlate with higher volumes which means more revenues obviously with investors they have no other opportunity to buy say like aptos and pre-seed so that's why they must buy aptos on binance right so there's a lot of factors that contribute to people buying L1s.

1:34:26I think it all traces back to 2018 for FAT protocols, which is written by, I think, Joel Monegro from Placeholder. He wrote a thesis about how in Web2, it's all about FAT apps, where the application layer captures majority of the users and values. So like Facebook, Instagram, multi-billion dollar entities. And then in crypto, it's FAT protocols, where the protocols capture most of the value. I think we started to see some refutation of this with things like Axie Infinity, right? You have like 3 million daily active users last cycle, multi-billion dollar app, really the first of its kind. And people started to doubt this, but because we didn't have another app that took off the same, to the same extent that Axie had, people are now reverting back to fat protocols.

1:35:11And they're saying, oh yeah, protocols are going to worth$100 billion dollars if they're successful first and first as an app it's going to worth 10 billion so given an option to buy both at 1 billion i'm going to buy the protocol because the upside is higher so i think that might not be a wrong thesis but it is contributing to the dynamic where everybody bits the infra yeah who's going to build and who's going to build the apps there's less incentives i'll just i'm just going to launch another layer one yeah another layer two right and there's also the market makers we had a few of them here like had the alexis your co-founder of gsr joan from winter mute and even they kind of say like if your protocol is not worth a hundred mil when it launches we're not even going to take it yeah like it's not worth it exactly so the whole thing is manufactured right yeah yeah that that's actually the entire thesis for Tangent in the beginning is because we realize all of the players and stakeholders in the space are incentivized to really come in at a big enough size.

1:36:14There's no one taking care of founders at the time that they need the most care, which is the pre-seed C stage when they're just starting. They have no idea who to talk to. They have no idea how to assemble a cap table. Who do I even reach out to people? And I thought, okay, why don't we raise a fund to take care of these founders? And the upside is higher as well. If you get early and you are right you're investing in protocols at like five ten million dollars and then we did the math and we realized actually it doesn't make sense if we raise too small of a fund we can't even pay the pay pay our employees so we thought okay whatever let's just do prop so that we have max flexibility we can do really early stage if we want but also do later stage if we want so it was really a reaction to that that kind of led us to the start tangent but you said before that usually the one grilling right and i don't grill people but you still have you're the you're the vc guy right dariel is more like the trader even yourself you have this incentive to be like ah i'm early in this protocol that launched at a 10 billion fdv it's fucked but i'm not really unhappy about it right?

1:37:28Well, it depends because is it$10 billion today at listing? If it is, then it doesn't really matter to me because VCs care because they raise money off of paper marks, right? They, they, they before, well, a lot of them have to raise on DPI now, which is actual dollars return. But in the bull market, a lot of them can raise on paper marks alone. You invest in something at least at a 10x, even though you don't get to cash out in four years, they can say, we have a 10x MOIC, multiples on your invested capital. And then your investors will look at that and say, oh, this guy looks like he knows what he's doing but for me as prop capital it doesn't really matter moic's don't pay for my lunch actual dollars return so if it's 10 billion dollars in four years then i'm really happy if it's 10 billion dollars today is that cool but can you sustain this in four years that is the bigger problem um and you know a lot of things that happen in four years and i don't think you can stay at a high valuation in the vicinity of like tens of billions of dollars for four years without actually shipping something right so for solana um they're only able If Solana didn't have this many apps building on it, I don't think it would be where it is today.

1:38:31So in the first cycle, maybe it can run on narratives alone. But the second cycle, it required those massive airdrops from apps that people were actually using. So I think it aligns my incentives a little bit better in that I actually need this thing to succeed in four years versus just like, hey, let's hype this thing up and dump this saft on somebody. You mentioned Solana. So first crazy cycle to$250, something like that. it wouldn't have come back without a lot of things happening on the chain, right? One of the things we mentioned a bit already, one of the big things that happened on Solana is meme coins.

1:39:07What's your take on meme coins? Yeah, I have... So we actually got involved with meme coins before this meme mania. We invested in a project called Meme Land. And when I explained the thesis, I was like, oh, we just invested in meme land. I remember a lot of my Twitter replies was like, oh, I didn't know you're a fucking scammer. is it the tweet where you say in september 2023 we invested in memeland as one of our what the bet of 2023 yes that's right that's right as a perennial meme coin skeptic and critic i was initially dismissive however while nine gag CEO struck off record as someone who built and operates one of the largest website in the world seems unknown to most in the west it wasn't for a fellow Hong Konger.

1:39:50I saw the promise of creating an actual digital community meant to bring people to crypto, not the other way around, which is what we talked about before, right? It's not bringing crypto to the masses, it's crypto, it's the masses coming into crypto, right? And made an uncharacteristic bet while it's still early days, Mimland debuted as the largest Binance launch this year. Maybe you want to start with like, What is MemeLand? Yeah. And why are you so bullish on the project built by the founder of 9gag? So MemeLand is actually the token for a social community. So it is portrayed as a meme coin, but it is really supposed to be a utility coin for a cluster of different projects with social use cases.

1:40:39So one of the projects is StakeLand, which is a free kind of liquid staking product. There's a few kind of NFT collections and a few other social products that the team is still building on that I don't think I can talk about yet. And it's all supposed to transact with this meme token. So I get taking a step back in terms of my views on meme tokens. I don't have any issue with people trading them. I mean, we trade them sometimes. But to me, I don't think they're viable investments in the sense that I wouldn't be comfortable with holding a meme coin for like four years. The way that I'll be comfortable with holding a project with a team, I would be very comfortable trading them.

1:41:14So I don't see them as investments. I see them as trades. And I think they're fun trades. Even if you've seen Dogecoin outperforming massively Bitcoin over its lifetime? Yes, I think it's probably just my personality. It's hard for me to underwrite. The only way I can underwrite it is actually, it's quite funny because after the meme coins took off, a lot of funds realized, oh, we can't buy meme coins because our mandate, our LPs will never be okay with this. So they try to over-intellectualize meme coins. They start to write blog posts about how meme coins are the purveyors of culture. These are distribution channels for you to go to market for your products.

1:41:45That is not the case for any of these meme coins. so wait so but the reason they're writing this down is to then be allowed to buy meme coins in their fund or it's just because they want to have something to say i think it's more of the former i mean if you have a lot of free time i think the latter is worse because it means you have way too much free time but the former is probably why people are writing these blog posts but it's actually objectively not what the meme coins are people just want to buy things because they don't want to play the rigged game of just like buying tokens with massive overhangs but if you look at meme coins that try to intellectualize and productize they actually didn't do so well like if you look at sheep uh shiba inu coin they try to become an l2 but uh if you look at and they raised money recently right for the l2 yeah exactly for the l2 but then it kind of kills the meme coin narrative exactly if you look at the performance there's not much difference from another meme coin who has no product so the product really doesn't matter for meme coins but my thesis before all of this took off was that meme coins are actually a distribution channel right it is a way to coordinate social communities and uh meme land actually is the only coin that actually does this unironically and they also suffer for it in terms of price right the performance if you track them against all the other meme coins uh they actually massively underperform because they are not a real meme coin that's the super interesting thing actually and they destroyed the game in the web to world with memes right yes so they should be if you think about it they should be like the leader but then it shows that the this meme coin concept is like a completely different thing because memeland is a coin about memes it's not a meme coin i think meme coins are very different from what memeland is doing and that's what i meant when i say that memeland is an ironic meme point because it's not really a meme point and the market agrees with me because yeah again look at the performance of with doge pepe all these coins and plot them against meme meme is just massively underperformed so i think now the market kind of understand what i'm talking about but obviously that comes at the detriment of performance so it's like a bittersweet victory so i'm making less than the other meme coins but i'm right on my thesis so for for me it's very hard for me to hold doge for like four years we've played doge before but for something like meme land you know i know there's a product i know there's a team that's done this before so i'm more comfortable holding it do you want to be right or do you want to make money yeah so in this case i guess we made some money but of course but we are also wrong in that uh yeah it's under for all the meme coins so i i think yeah people are very confused about what the fuck i was talking about when i first explained my thesis for meme coins and now people are trying to fit the meme land kind of business plan to all the other meme coins out there and it's not working.

1:44:37How is the meme coin explosion linked to the current state of venture investing? I think we talked about that, which is venture investors getting early access to the best opportunities, which means when they come to market, their valuations are very jacked up. So the returns for retails are perceivably lower. I think one solution is actually ICOs. But with all good things in crypto, it was taken way out of proportion. You have way too many bad actors and scams and you force the hands of regulators. Does that mean that

1:45:16if Suzu is right, people are stopping to buy these high FDV coins, right? Therefore, the market will sort of auto-correct. does that mean that meme coins have less of a future than what people think or do you still think that as you said before as a as a sort of uh how do you call that sub industry or kind of category has some future i think the category itself is lindy right it's it is you know empirically true that it's stuck around for every single cycle and it has maintained uh significant volumes, at least for the top pair like Doge and Synecron Mindshare. So I don't think the category will go away.

1:45:56I do think within the category, there's massive rotation with Pump.Fun, which has got exploited. They're printing out like 600 ,000 meme coins over the past three months. So the rotation between meme coins is very, very fast. So if you want to play that game, then that's obviously your own choice. But I do think that over time, the market pendulum tends to swing both ways so now it's swung to the side of so-called financial nihilism and meme coins and completely away from fundamentals and uh you know growth and so on i think it will swing back eventually do you think there is a world where meme coins not like random meme coin that launch on pump not fun right but like let's say like some of the biggest meme coins of different chains become like the best beta of that chain.

1:46:48And the kind of underlying logic would be crypto is still a, there's a lot of retail people, right? And what are the, we call them normies or not necessarily less smart than us, right? Like, what are they doing when they come into crypto? What's your girlfriend doing when she comes into crypto? is she buying bitcoin because it's the you know future of money or the digital gold or ethereum because it's the word computer or is she like oh i want to have some fun therefore oh ethereum what's on ethereum that's cool i like pepe it's fun i'll buy pepe right like and they go straight to the meme coin of like that specific like a big one like right i'll buy with right on solana so is there a world where this i mean actually hear some thesis from like some pretty big guys were saying like actually it looks like maybe not for the next 10 years but like for this cycle meme coins might be one of the best levered bets on different chains right yeah i mean people are obviously using them as such right if you look at the performance of native meme coins on versus their base chains there's periods where they just massively outperform i think part of that is because of the inflows from retails like you mentioned.

1:48:09But then I think it's also important to remember that the barrier to entry for meme coins are lower than the barriers to entry for L1. So it's much easier to build a whiff fork than a Solana fork and bootstrap it with a community. So I think it's an easier call if you are bullish on retails entering the space for me to buy Solana and hold for like four or five years than to buy whiff for four or five years because within those four or five years, you might have the next whiff. you might have the next olana meme point yeah makes a lot of sense there's a part in this podcast where we talk about alpha alpha as we talked about before is not uh the price prediction but uh your favorite project in the space so we took before this podcast we talked about three of them the first one is athena what is athena and why do you like this project and this team so much Yeah.

1:49:02So Athena was pitched to us as an internet bond. It's the first internet native bond. What that means is it is a financial instrument where you can hold. And the yield is supposedly coming from nothing but the internet, especially the crypto native internet. So how they do this is you take an Ethereum, a unit of Ethereum, you put it in LIDL, you stake it. And then you use that as collateral, you put it on an exchange, and then you short the equivalent amount of Ethereum. So you completely hedge it out. So the bond, supposedly, it's supposed to be at a dollar. And because you're earning the ETH staking yield from Lido and also the funding rate from short ETH, you're earning like 20, 30 % average throughout the past bull market.

1:49:42At least that's what was pitched to us. And I thought that was extremely fascinating. Not because it hasn't been done before. Similar concepts have been done before in DeFi to a smaller scale. But because they kind of challenge the idea of what it means to be crypto native. I think I'll be hard pressed to find a person who doesn't think centralized exchanges like Binance are crypto native. Like they're very crypto-only institutions. These are not banks. These are not regulated in the same way as banks. So they're very much kind of crypto. So these guys were the first to think that, hey, actually a crypto-native bond doesn't just mean DeFi.

1:50:13We can also rely on centralized exchanges. So that was very controversial. A lot of people have thoughts that, hey, you're relying on, you know, opaque centralized community, you know, entities again. But for me, the justification is that decentralization is a spectrum. If usually the more you trade off decentralization, the more you gain in efficiency. And we've learned from past experiments that are similar before that, that were fully DeFi native, that they just didn't get scale because they were doing the hedging on DeFi exchanges. It wasn't liquid enough. Nobody cared. And then these guys were just like, okay, let us tweak the parameters a little bit and go a little bit more centralized and rely on a few centralized exchanges.

1:50:51And they instantly hit a scale that was hundredth of the last winner. So that tells me they have made the right market choice, actually. So I'm very excited about how first principles driven the founder guy is and how execution focused he is. It's not easy to talk to exchanges and get these partnerships, especially after FTX. These exchanges, I think, have really tightened up in terms of what projects they work with, in terms of the risk parameters they have. And the fact that he was able to convince these exchanges to work with him as a new project was also something that really speaks to him as a founder.

1:51:22So yeah, I'm really excited to see where they go. I hope they don't blow up. We'll see.

1:51:30there's another project that you really like, Say. What's so special about Say that made you invest in the project rather than other layer ones out there? Yeah, so in general, we don't invest in layer ones that much, right? We don't like to, we like to invest in apps. So when Say first pitched us, it was actually more like an app than a chain. They basically had the insight that all DeFi perpdex exchanges, perpetual swaps exchanges or futures exchanges are very clunky. and it's not because of the app. It's because the infrastructure, even though you have very fast chains like Solana, just wasn't fast enough to support something that could be feature parity with FTX.

1:52:07So they were going to build a chain that allows you to build a feature parity FTX. And it was a very app-driven thesis that we were very excited about because no other founder was thinking this way. Every other founder was thinking, oh, we're going to decentralize our chain this way. We're going to use our ZK proofs this way. You know, our fraud proof model is going to be different in this way, which didn't really speak to us as kind of app guys. so that's why we chose to work with them and then over time they kind of expanded the vision a bit to include the parallelized approach they're doing now and I think over the past year just seeing both Jeff and Jay the two founders one technical, one BD focus just extremely good at doing what they do that was also very exciting to see Last project that you really like is Farcaster why are you so bullish on what Farcaster team is building?

1:52:56Yeah, so we're not an investor in Farcaster. We have them DGEN token, which is a token on Farcaster. I used Farcaster two years ago. And I remember I DMed the founder on Twitter when he was asking for feedback. And I was like, my main feedback is that this doesn't give me too much of a differentiated experience from Twitter. It's basically just Twitter, but on a blockchain. So I don't find myself coming back to this every day. And then two years later, I checked back and they've incorporated so many new features. It's more than just Twitter for CT now. It's actually Twitter where you can mint coins in the feed itself with the concept of frames.

1:53:30So they've really become a browser, the go-to browser for crypto. And I've always been very bullish on the browser thesis. We actually invested in a few that didn't quite work out. But seeing how far they've come since then was very exciting for me. And the other thing is also just objective data as well. If you look at daily active user charts, most social applications go like this. And going back to the point about defying death, I think Farkaster had a moment where it went like this as well. And then now they're all-time high in terms of users. So the fact that they were able to lose interest in the market and then regain that interest, but at a bigger scale, was also a sign to me that we should pay attention.

1:54:06So unfortunately, we're not investors in Farkaster. So we chose to express that through just by buying some Degen tokens, which is, I believe, a third-party token that someone issued. And it somehow became adopted as the transacting currency on Farkaster.

1:54:22what's something you believe in that most people would not agree with i think it's been the same for the past four years which is i think apps will outperform protocols especially now because protocols are getting bid so high i think i was probably wrong on this last cycle because protocols still did so well but with the way that venture valuations are rising for infrastructure projects and apps are not really following i do think apps will produce bigger outcomes and you know big example already is athena full launch's application and it's already a pretty massive outcome for for the seed investors at least on paper i think that will continue

1:55:02but this is only a game accessible by vc is still right so what you're saying is

1:55:11the outside return will go from layer ones or infrastructure to apps, but still won't be accessible by the majority of the people. Not necessarily, right? The biggest example lately was Friend, Frentech. I believe they burned all the VC tokens. I believe the team doesn't even have tokens. So you can only buy it on, so everybody was buying it on chain. I think people were kind of looking at my address and looking at me buying a lot of friend tokens. I do think there will be more examples of those type of fair-ish launches where the team equity might be funded by a VC, but the token is like just completely community owned.

1:55:50And those could be interesting opportunities. So on the lookout for more of those. What's your biggest prediction for next 12 months? Next 12 months. So the funny thing is we do predictions once a year internally just for fun. Because we know that it never, ever works out. You can never predict where the market goes. And if you make decisions off of that, you're screwed. So I think a fun thing is I was predicting that current AI tokens. This is back in January. Current AI tokens would do poorly because they're all vaporware. I was completely wrong on that. I think I was predicting that BRC, like Bitcoin stuff would go away.

1:56:25I was completely wrong on that. So never make predictions. but if i must i do think that uh safe one would be bitcoin hits 250k within 12 months within 12 months safe one safe one i mean i just gave my track record on predictions it's always exactly safe wrong bet safe wrong bet feel free to fade it feel free to fade it i'm probably wrong on this what's your thesis on like 250k actually casper he said the same he said i think he's going to 250k i think this was like a half meme target that we've always had back even when i was back at spartan we were always talking about one day 250k so that was kind of always in the back of my mind and you think that one day is the next in the next one month i think so well depending on the elections outcomes i think it's possible that would be crazy i think it's possible yeah amazing Thank you so much for doing this, man.

1:57:22That was super fun. Yes. Thank you so much for having me. Thank you.